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Why Lowe’s Failed to Meet Analysts’ Expectations in 2Q17

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Part 8
Why Lowe’s Failed to Meet Analysts’ Expectations in 2Q17 PART 8 OF 8

What Analysts Recommend for Lowe’s after 2Q17 Earnings

Target price

Lowe’s (LOW) lower-than-expected 2Q17 EPS (earnings per share) and lowered EPS guidance for 2017 could have prompted analysts to lower their 12-month target price to $83.64, which represents a return potential of 14.0%. Before 2Q17 earnings, analysts had forecasted a target price of $88.9.

What Analysts Recommend for Lowe&#8217;s after 2Q17 Earnings

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After the announcement of 2Q17 earnings, several analysts have lowered their target price. On August 24, 2017, BMO Financial Group lowered its target price to $82 from $89, Wedbush Securities cut its target price to $75 from $85, Citigroup cut its target price from $83 to $80, and Jefferies cut its target price to $75 from $89.

The target price and return potential of Lowe’s peers are as follows:

  • Home Depot (HD): $171.15, which represents a return potential of 14.4%
  • Bed Bath & Beyond (BBBY): $32.32, which represents a return potential of 15.7%
  • Williams-Sonoma (WSM): $50.16, which represents a return potential of 10.5%

Analysts’ recommendations

Of the 30 analysts that follow Lowe’s, 53.3% are recommending “buy,” 43.3% are recommending “hold,” and 3.3% are recommending a “sell.” After the announcement of 2Q17 earnings, BMO Financial Group downgraded the stock from “outperform” to “market perform.” Lowe’s stock price moves in tandem with analysts’ ratings. When they raise their estimates, the stock price rises and vice versa.

Analysts’ average target price is lower than Lowe’s current stock price. However, this does not mean an automatic “buy.” Investors should carefully analyze various analyst estimates that we discussed in our earlier articles before making any investment decision.

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